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MVNO growth to be driven by expats?

While it's difficult to gauge the extent that new low cost mobile providers (MVNOs, or mobile virtual network operators), like recently launched Amaysim and Lycamobile, will shake up the current market, the familiarity of these business models to expats and migrants may be the key to their survival, according to an industry analyst.
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Written by Colin Ho on

While it's difficult to gauge the extent that new low cost mobile providers (MVNOs, or mobile virtual network operators), like recently launched Amaysim and Lycamobile, will shake up the current market, the familiarity of these business models to expats and migrants may be the key to their survival, according to an industry analyst.

Amaysim and Lycamobile, based in Germany and the UK respectively, have had modest success in the overseas market. According to IBRS analyst Guy Cranswick, the pay-as-you-go pricing and contract-free structure may appeal to expat users who are already accustomed to using prepaid phone cards to dial overseas.

"The price offer and ease of just taking up the product would work really well with many people who have family in other parts of the world," said Cranswick, giving examples of students from Asian and European countries.

Furthermore, these customers often have language issues which may make the often complicated terms and conditions of existing plans and contracts daunting and unattractive.

"While many are going to have serviceable English, sometimes looking at terms and conditions can be confusing. The level of English in these things are higher and the print is often tiny, so you might not know what you're getting into," said Cranswick.

While the MVNO services are more complex than the prepaid international dialling cards, Cranswick believes there is an opportunity for companies to reach out to migrant communities through information packs in languages other than English and targeted distribution to places like ethnic grocers.

Some services even let the users pick their own language.

However, Cranswick acknowledges the success of these services overseas may not necessarily translate to Australian shores where population is relatively low in comparison to Europe or the US.

"I'd have to spend more time and wonder if they're going to be more profitable. Because of the way they run, because of their business model they offer and how they maintain competitiveness in the market, again their margins are extraordinarily tight," said Cranswick.

Nick Ingelbrecht, an analyst from Gartner, agrees with this sentiment. In his eyes the history of MVNOs in Australia has been "chequered" and low margins of the MVNOs often mean that companies would need to run a tight ship to stay afloat.

Are the MVNOs pushing the giants to change?

Recently, Telstra outlined plans for its "Project New" reforms that include an aim to simplify its pricing for customers.

"This low cost, pay-as-you-go utility makes a lot of sense given the complexity and the number of complaints that mobile phone users have in this country about their plans," said Cranswick.

"As we move to a more saturated environment, it's going to put more pressure on pricing and people with low-cost operating models are going to be better prepared to deal with that situation," said Ingelbrecht, although he believes that low prices are only lethal if they are combined with customer service and brand loyalty.

While Cranswick and Ingelbrecht claimed that MVNOs could shake up the mobile industry, Ovum regional senior researcher Nicole McCormick said that the big telcos have little to fear from the new upstarts.

"The fact remains that such MVNOs will not pose a huge threat to the incumbents, otherwise Telstra and Optus would not have allowed them to use their networks in the first place. Instead, the big network operators typically support MVNOs that attack the market niches that the big operators find hard to reach," she wrote in a comment piece to journalists.

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